Tuesday, October 5, 2010

TAC 9-27: Gate and Gas vs Long Term Lease

The main topics of the latest TAC were Gate and Gas (GG) vs Long Term Lease (LTL) and the Driver's Fund. Both subjects were discussed at length and in depth so I'll deal with them in separate posts.

First, I want to apologize in advance for any omissions or errors. I recorded the proceedings and slacked on my note keeping. When I listened to the tape, however, the only people I could understand were myself and Carl Macmurdo, who sat next to me. This article, in other words, will be even more a stream of consciousness than usual.

                                   Random Stuff

San Francisco, the third most expensive city in the country, has the 10th highest taxi fares.

Some Pilot Program Stats:
  • 18 medallions are being issued to people on the list.
  • 1 SFMTA held medallion has been transferred (i.e. sold) to a buyer.
  • 19 medallion holder medallions are in the process of being transferred.
  • 9 Pre-K medallion holders have died during that last year.
  • 3 Pre-K medallions have been sold.
Quote of the week,

"Cab drivers are all schemers and frauds ... and need to be watched." Bill Mounsey  (photo, above) on the drivers ahead of him on the Waiting List.

Leasing vs Leasing 

The above title is my way of noting that no other system  (like a split of the meter) is in play. 90% of the county may work on some form of employer-employee relationship but we in the cab business prefer to stay in the same league as strippers, office temps and call girls.

The Name Game.

The initial discussion centered around tying to decide what to call the new owners who chose to work their cabs as an LTL. Some people wanted to call the relationship an "affiliate" because the new owners would usually be affiliated with a color scheme but I think Rebecca Lytle of the San Francisco Federal Credit Union carried the day by calling them "Owner Operated" leases (OOLs.)

The Owner Operated Lease.

It's basically the same as an LTL, except the owners don't lease it from a company. They buy their own cars and chose their own drivers. If they associate with a company, they pay for the radio and the color scheme.

There are significant differences in the way the contracts are written because the credit unions demand certain information from the owners (I'll cover this later in an interview with Rebecca Lytle) but the taxis themselves are worked much like an LTL.

The Leasing Debate.

There are strong feelings on both sides of the GG vs LTL issue.

Green Cab manager and councilor Anthan Rebelos said that he had "about five pages" of things he didn't like about the LTL. Councilor and driver John Han, Mark Gruberg of the UTW and myself also spoke strongly against the practice. Putting our ideas together, you could come up with the following partial list:
  • Hundreds of experienced drivers have lost their shifts or their jobs.
  • They've been replaced by drivers with less knowledge
  • LTL drivers are less likely to take radio calls.
  • LTL taxis hurt service in the neighborhoods.
  • LTL cabs are frequently subleased to brokers.
  • These brokers are charging desperate people illegal amounts of money to drive shifts.
  • This brings a criminal element into the industry and, as such, creates situations of potential violence.
  • This is almost impossible for the MTA to police.
  • The companies themselves often don't know who's driving their cabs.
  • This increases the potential for catastrophic insurance losses; and 
  • Endangers the public.
  • Jim Gillespie of Yellow Cab says that LTL drivers are as likely to take radio calls as anyone else.
  • In the past, he's also claimed that LTL drivers get into fewer accidents.
  • A man whose name I didn't get (photo, right) said that he'd been driving for 34 years and had been given junk taxis under the GG system.  He now works under an LTL  and loves it because he's got a brand new cab and makes a lot more money.
  • Driver Ton Lee, who represents Asian drivers at the airport, said that LTL drivers work hard just like everybody else and deserve consideration.
The Devil Made Him Do It.

John Lazar of Luxor Cab said that he resisted LTLs until 2004 when he "lost 24 GG medallions."

This echoed Jane Bolig of Desoto Cab who said, "medallion holders are diving the system" by setting up bidding wars between companies (Hmm - guilty). She also said that "insane" liability insurance rates were forcing companies to change the way they do business.

"Force" is a big word with Lazar who claimed that new buyers were "forced" to go OOL because of the high cost of their loans. At an earlier meeting, he had said that a buyer making $2,300 a month couldn't cover $2,700 a month loan. This time he asked Rebecca Lytle to confirm his theory.

Ms Lytle, however, did nothing of the kind, saying that their cheapest monthly rate was $1,446 per month for a 25 year balloon loan. She later told me that the rates for the other loans that she had underwritten were:
  • $1,798 for 15 year balloon loan.
  • $2,304 for a 12 year fixed rate loan.
Not Forced - Wanted.

Nonetheless, all but a few of the new buyers have chosen to become Owner Operators. This is something that few people at the Town Hall meetings anticipated and it changes the dynamic of the sales. All the calculations that were done to come up with the $250,000 fixed rate were based on a GG system.

Once upon a time, Director Chris Hayashi told me that she wanted to end LTLs. Even if she still wanted to do this, it would take three years to phase them out because of the money the drivers have spent on cars. And, what about the new OOLS?

There could be a lot more said about this subject ... and there will be.


  1. I'm sorry to say but our industry seems often times to be it's own worst enemy. How many industries literally chase away their client base. We refuse to pick up passengers so that we can sit for 30min.- 2hrs. at SFO. Drivers on hotel lines won't take fares unless they go to SFO or down the Peninsula. Vehicle interiors are often disgusting, drivers are unqualified and there are rogue cab companies in the City that are clearly uninterested in serving the general public. They spend zero dollars on infrastructure. Not a nickel! Then we wonder how the Town Car industry has become such a popular alternative. With all due respect to the medallion holder that you referred to who says that he always drove junk cabs, I have a very simple question. Did you ever try moving your medallion to a cab company that was worth a damn? I know that he didn't, he's at one of the City's rogue companies. I know him, he's a nice guy but he's been with the same company forever.

  2. Nice commentary Ed. I know this may sound contradictory but every time I get into a cab that's a LLT, it's always a well-maintained, clean cab and pleasant to ride in. That being said though, it opens the door to illegal brokering, adding a criminal element, and at it's worst it's been described as human trafficking. And, it puts lots of GG drivers out of work.

  3. The answer is in enforcing gate caps on every cab. You have brokers charging any gate they like and the drivers keep quiet because they need the job. Brokers would disappear if gates were actually controlled. Gate caps and requirements for reciepts are for every cab not just gas and gates cabs but of course how can I prove I gave someone a reciept.
    BTW Athan, when you have a cab for 24 hours you can't "play the city" cuz you would be exausted after 8 hours.
    BTW, I ran into the victim of a broker that paid $28,000 for a car that I would have paid no more than $14k for. That was part of the cost of "buying" his job.

  4. Athan - I didn't realized that the guy was a medallion holder. If so, it makes what he said bogus.

    Hybels - how do you enforce a gate cap with a broker?

  5. Long Term Leasing allows drivers to keep cabs for 12 hours. What does that mean:

    1. Most LTL drivers just service hotels and SFO as they have extra time to wait.
    2. They do not service areas like Potrero Hill, Sunset, Richmond, Marina as much.
    3. They work themselves to death, often seven days a week (five 12hr days + one 18hr day + one day off).
    4. They definitely get the same cab everyday and do not have to deal with company employees everyday but they are so tired in their long shifts that they do not treat customers fairly with enough customer service skills. Most LTL drivers would fail a fourth grade English test. Thanks to that A** H*** Johny Dangerously who is in big danger now who granted taxi driving permits to people who do not even know how to say 'SFO' or 'Howard' or 'Bryant' or 'Jefferson' ... so on.

    Long Term Lease eliminates the industry's ability to evolve into better systems and technologies.

    In a company drivers are held in better check.

    So when will we introduce a mandatory annual drug check up for all drivers + a bimonthly-no-notice-surprise-drug-check-up-at-SFO to catch some of these drug addict m**** f****rs who do drugs in the cabs.